Mexico Monetary Policy

Mexico: Banxico maintains its monetary policy stance

October 15, 2010

At its latest policy meeting on 15 October, the Central Bank (Banxico) left the policy rate unchanged at 4.50% for the 14th consecutive month, in a decision widely expected by the market. Monetary authorities stated that inflation remains below expected levels and, despite a projected acceleration in the final months of the year, it will likely resume its downward trend in 2011. The Bank stated that high liquidity in financial markets, owing to loose monetary policies in developed economies, is translating into substantial capital inflows in developing markets, as investors seek higher yields abroad. These capital inflows, in turn, are prompting emerging markets currencies to appreciate, raising asset prices in the countries and boosting international reserve levels. Moreover, monetary authorities noted that, while domestic consumption and investment continue to show signs of an incipient recovery, the ongoing vigorous rebound in manufacturing production and exports could slow as economic activity decelerates in the United States.